Airline Industry

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Airline Industry

General Environmental Analysis
The airline industry is very stable and unlikely to change in the near future. There are many reasons for this. Air travel continues to grow and will continue in this fashion as long as the economy stays in an upward trend. US domestic air traffic grew 2.3% in 1998 and 3.5% in the first six months of 1999 according to Air Transportation Association. The percentage of flyers has increased an average of 2% each year and the percentage of people who have ever flown before increased from 73% in 1993 to 81% in 1997. (Airport Transport Association, Internet). The top three reasons that people fly are business trips (47%), visiting relatives (38%) and going on vacation (13%). Most airline revenues are gained from the fares they charge these passengers, but they also earn ancillary revenues from transporting mail, shipping freight, selling in-flight services and from serving alcoholic beverages (Airport Transportation Association, Internet). The primary target market of airline passengers today is the business traveler because business trips account for the majority (47% ) of airline flights. Though this percentage of business trips is slowly declining, the actual number of business travelers is increasing. The business traveler fits the description of the average airline passenger of being male, between the ages of 35 and 54, having a household of $60,000 or more and lives in the western region of the country (Airport Transportation Association, Internet). The business traveler tends to be very price inelastic in terms of plane fares and as a result, airlines provide benefits to them such as priority check-in, expedited baggage handling, frequent flier miles and in-flight cell phones to business people to entice them to fly with their carrier. The other segment of the airline market is that of leisure travelers. These passengers tend to be extremely price sensitive which is exactly opposite...